NatWest Group reports higher-than-expected earnings after providing more mortgages

NatWest Group has become the third high street bank to report higher-than-expected earnings after revealing it provided more mortgages in recent months.

The banking group said it made an operating pre-tax profit of £1.7bn between July and September, nearly a third higher than the £1.3bn generated this time last year.

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It beat forecasts, with analysts’ previously expecting a profit of £1.5bn for the latest period.

NatWest joins Lloyds and Barclays in unveiling higher profits than analysts were expecting this week, as the banking sector continues to strengthen as interest rates start to fall.

NatWest Group has become the third high street bank to report higher-than-expected earnings after revealing it provided more mortgages in recent months. (Photo by Matt Crossick/PA Wire)NatWest Group has become the third high street bank to report higher-than-expected earnings after revealing it provided more mortgages in recent months. (Photo by Matt Crossick/PA Wire)
NatWest Group has become the third high street bank to report higher-than-expected earnings after revealing it provided more mortgages in recent months. (Photo by Matt Crossick/PA Wire)

NatWest said it grew its lending by more than £8bn over the third quarter, with the acquisition of Metro Bank helping bolster its mortgage book.

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It also said the amount of money customers held with the bank increased by £2.2bn, driven by more cash being put into savings.

Chief executive Paul Thwaite said: “With customer activity increasing, defaults remaining low and optimism amongst businesses and consumers, we are well placed to succeed with our customers and for our shareholders in the months and years ahead.”

Meanwhile, the lender said its business expenses were nearly £150m lower than the previous three-month period, with Mr Thwaite continuing to oversee a simplification of the bank’s structure.

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Nevertheless, NatWest revealed that it took a £24m hit to costs in relation to the planned sale of its shares to retail investors.

The bank had been preparing for the share sale, including an advertising campaign, which was proposed by the previous Conservative government but scrapped when Labour won the general election earlier this year.

Richard Hunter, Head of Markets at interactive investor, commented: “The stars have been aligning for NatWest and this latest quarter has added to the growing momentum, prompting another upgrade to its guidance for the full year.

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"The bank has not only improved its performance on the vast majority of key metrics, but in doing so has also sailed past most analyst expectations.”

"This extremely reassuring update comes against some heightened expectations, since NatWest has become the focus of strong investment attention in the recent past. The share price has risen by 74 per cent over the last year, albeit from a relatively low base, as compared to a gain of 11.5 per cent for the wider FTSE100.”

Will Howlett, financials analyst at Quilter Cheviot, said: “NatWest delivered another strong quarter with its latest results being well received again.

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"NatWest does have some real momentum behind it, but how long this can continue as interest rates fall remains to be seen.

He added: "From a positive perspective, guidance has been raised again with strong income forecasts. However, net interest income makes up over 75 per cent of NatWest’s overall income take, so as rates come down, returns will be harder to come by even if hedges help smooth this effect.”

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